Ag prices tied more to ethanol than food

CHAMPAIGN, Ill., Nov. 12 (UPI) -- A U.S. agricultural economist says crop growers' fortunes are now tied more to ethanol than food.

"We're just experiencing the full brunt of this new source of volatility," said University of Illinois Professor Scott Irwin. "When food prices were the main trigger, recessionary impacts were much less direct and much more gradual. Now, there's this new connection through energy costs that immediately gets translated to agriculture."

He noted corn prices climbed to nearly $8 a bushel in futures markets during the summer amid strong global demand that pushed gasoline to nearly $4 a gallon. But pump prices have since tumbled to nearly $2 a gallon as a credit crisis and looming recession put the brakes on driving.

"Over the next couple of years, with normal weather around the world, I think we'll see corn prices ranging between $3.50 and $4 a bushel, closer to the low end with good weather and the high end with bad," he said. "But with a weather disaster, prices could easily spike to $5 or $6 again."

Irwin's report, included in a five-part package developed by economists to guide farmers through the current financial crisis, is available at http://www.farmdoc.uiuc.edu/IFEU/index.html.